Williams Capital Conference Chicago, IL April 10, 2014
Organization of Business Lines South Jersey Industries South Jersey South Jersey Gas Energy Solutions 3
SJES Regroups South Jersey Energy Solutions South Jersey South Jersey Energy Services Energy Group Marina Energy South Jersey Resources Group South Jersey Energy Service Plus South Jersey Energy Millennium SJ Exploration 4
Senior Management Team Edward J. Graham Chairman & CEO SJI Michael J. Renna President & COO SJI David A. Kindlick Gina Merritt-Epps, Kathleen McEndy Stephen H. Clark Jeffrey DuBois Esq. General Executive Vice VP, Human…
Long Term Performance Dividend Growth Peer Increase Per SJI Payout Percentage Percentage Year Share Ratio Increase Increase 2009 13 51.4% 10.9% 4.6% 2010 14 50.2% 10.6% 6.4% 2011 15 51.8% 10.3% 5.0% 2012 16 54.5% 9.9% 1.8% 2013…
Total Shareholder Return 10 Yr. Return 350% 300% 250% 200% 150% 100% 50% % S&P 500 S&P Utilities Peer Group SJI Index Reflects 20042013 Performance 7
NearTerm Performance 2013 Actual Economic Earnings Contribution Utility 64% Total NonUtility 36% Utility 62.2M NonUtility 34.9M Economic Earnings 97.1 Million 9
NearTerm Performance 2014 Guidance 612% EPS growth (3.21 to 3.39) Utility Customer growth/Conversion goal Rate case Nonutility Natural gas transmission capacity Energy project portfolio 10
2014 Preview 2014 EXPECTED CONTRIBUTIONS TO EARNINGS Business Segment Expected Contribution to 2014 Earnings Gas Utility Operations 60% 65% Energy Group 6% 15% Energy Services 20 30% 11
The Future of SJI South Jersey Gas South Jersey Energy Solutions CHP/Thermal Project Development Base Rate Case and Operation Renewable Project Development and Customer Growth Operation Accelerated Infrastructure Wholesale…
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SJG Service Area Serve the 7 southernmost counties of New Jersey 362,000+ customers 12 93% Residential 12 12 16 7% Commercial/Industrial 24 16 1.4% customer growth 20 10 10 24 in 2013 12 24 20 12 24 System: 123 miles…
Utility Growth Drivers Rate Case Core Filing B.L. England Liquefaction Accelerated Infrastructure Replacement Program (AIRP) Storm Hardening Asset Replacement Program (SHARP) Customer Growth 16
Base Rate Case Filed 11/29/13 Covers projected 553M of infrastructure spending since last case Requesting 62M increase in operating revenue, equating to 27.1M increase in net income Filing requested 11% ROE and 54% Equity/Cap…
Utility Capital Investment Capital Spending 2004 2014 (M) 200 180 160 140 120 100 80 60 40 20 2004 2006 2008 2010 2012 2014 E 18
Utility Capital Investment 2014 SJG Projected Capital Expenditures 182M LNG 2M* CNG 5M* SHARP 21M* Base Capital 116M AIRP 38M *SHARP, LNG & CNG are special projects 28M 19
Utility Regulatory Proposals Valuation Methodology AIRP SHARP (as proposed) Potential Annual Capital 35.3M 40.0M Investment 51.2% X Equity/Cap Ratio 51.2% 9.75% X Current ROE 9.75% Estimated Incremental 1.8M Annual Net Income…
Utility Customer Growth Natural Gas Price Advantage Annual Commodity Cost for a Typical Residential Customer 21
Compressed Natural Gas Station Construction CNG pilot station announcement Two SJGowned stations operating, two more planned for 2014 5 third party owned stations in service area Current Use Service area throughput doubled from…
Utility Growth Summary 2014 Incremental Net 2015 Incremental Net Investment Income Benefit (Ms) Income Benefit (Ms) Rate Case Core Filing 3.9 8.8 BL England 0.2 1.8 Liquefaction Phase II 0.4 1.7 AIRP 1.8 1.8 SHARP 0.0 2.0…
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NonUtility Growth Drivers South Jersey Energy Services Onsite energy project development HVAC Service Meter reading subsidiary South Jersey Energy Group Marcellus marketing o Wholesale o Retail Merchant generation fuel supply…
Energy Services Strategically Targeted Project Development CHP /Thermal Steady Increasing Income Stream Opportunities to Develop and/or Acquire Asset hardening Solar/Renewable Selective growth Improving SREC value ITCs to begin…
Energy Services CHP/Thermal CHP/Thermal Project Analytics Modeled as: 20% 30% equity component ROE of 15% 20% Joint venture ownership with longtime partner Project financing Target adding 12 new projects per year 27
Energy Services Solar Markets Sharp decline in construction costs NJ Positive Trends Slowed build rate Strengthening SREC market Selective gridbased development Increasing Attractiveness of MA market Proposed extension of solar…
Merchant Generation Contract Components Reservation Fee Fixed monthly demand charge Volume Throughput Indexbased commodity price Contract Term Longterm Includes margin with significant upside from optimization of contract load…
Energy Group Wholesale Business repositioning as fuel manager for merchant electric generating facilities Actively negotiating multiple fuel management contract opportunities Actions taken to improve profitability Increased…
Energy Group Retail Competitive third party electric/natural gas commodity retailer Active in 8 states Focus on organic growth Geographic expansion 32
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Liquidity & Capitalization Target average equity/cap ratio of 50% 54 million equity capital raised in 2013 through dividend reinvestment & optional cash purchases Deferred tax assets of 223 million to support further…
Wrap Up The Future of SJI Utility Safety & Reliability B.L. England CNG Customer Growth Nonutility CHP / Asset hardening Renewable Commodity impacts (retail and wholesale) Capital Investment 35
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